Remarks by AIT Director Stephen M. Young at the 30th Annual Plenary Meeting of the ROC-USA Business Council

OT0615E | Date: 2006-08-16

Thank you Chairman Chen, ladies and gentlemen.  It's a real pleasure to be here at the important occasion of the ROC-USA Business Council's 30th anniversary.  There is a popular saying in my country from the sixties, advising young people: "Don't trust anybody over 30."  Well, I'm here to tell you -- don't worry, America still trusts you as you mark this important anniversary.  The Council has been an important partner in strengthening U.S.-Taiwan relations these last thirty years and it's going to continue as an important partner for the next 30 years -- and beyond.

In that spirit, today I'd like to take a quick look back at how U.S.-Taiwan relations have evolved and deepened over the last 30 years as well as the state of our partnership today and the challenges we face.  Then I'd like to tell you about some of the things that the United States is doing to make sure that the U.S.-Taiwan relationship continues to flourish.  Finally, I'll offer my own thoughts on what Taiwan should do to further consolidate our partnership.

30, 20, 10 Years Ago

Thirty years ago, when the ROC-USA Business Council was founded, U.S.-Taiwan relations were entering into a difficult stage.  The United States was actively negotiating normalization of relations with the PRC and nearing the end of formal diplomatic relations with Taiwan, which occurred in January 1979.  The relationship between our peoples and our economies was robust but still developing.  Bilateral trade between Taiwan and the United States totaled US$4.8 billion in 1976.  Textiles were a key export as were calculators, an industry that held the seeds of Taiwan's high-tech miracle.  The U.S. had invested a total of US$550 million in Taiwan.  More than 15,000 Taiwan students were studying in the United States.  It was this relationship that the founders of the ROC-USA Business Council looked to preserve and strengthen.

Despite the break in formal diplomatic ties, substantive trade and investment kept on growing.  At your tenth anniversary in 1986, total bilateral trade had rocketed to US$24.4 billion.  Cumulative U.S. investment had nearly quadrupled, reaching US$2.1 billion.  People traveled back and forth between Taiwan and the United States in large numbers with nearly 85,000 U.S. visas issued that year.  Skilled and ambitious Taiwan engineers and scientists were beginning to return from the United States to help build Taiwan's burgeoning high-tech industry.  My favorite example is Morris Chang, who returned after a long and successful career at Texas Instruments to found TSMC.  But there are many, many other success stories of that type.  Economic interests and business relationships also helped fuel the development of an unofficial, but close bilateral relationship, across the board.  That relationship took shape under the 1979 Taiwan Relations Act, which created AIT.

Fast forward to 1996, and our relationship had further matured.  Taiwan was better able to reengage the international community after it joined APEC with U.S. support in 1991.  Our economic relationship flourished in new ways with the ascendance of Taiwan's semiconductor and information technology industries.  U.S.-Taiwan trade continued its dramatic rise reaching US$46.9 billion.  U.S. investment in Taiwan expanded to US$6.8 billion.  The number of visas issued by AIT reached a peak at 366,000, and 37,000 students were studying in the United States -- more than twice as many as twenty years earlier.

The Relationship Today

This year, the ROC-USA Business Council turns 30 and we can plainly see the fruits of its labor.  The United States supported Taiwan's entry into the WTO in January 2002, offering Taiwan a powerful new forum to engage the international community multilaterally.  With Deputy U.S. Trade Representative Karan Bhatia's visit to Taiwan in May of this year, we have a newly reinvigorated channel for bilateral economic cooperation under the Trade and Investment Framework Agreement.

These efforts have seen our trade continue to expand.  Last year, total bilateral trade was nearly US$60 billion.  The U.S. is Taiwan's number three trading partner and Taiwan is the United States' number eight trade partner.  But these figures don't tell the whole story.  Exports to the United States accounted for 15 percent of Taiwan's total exports.  But U.S. firms accounted for a substantially higher portion of orders placed with Taiwan companies.  U.S. firms placed orders worth US$68.9 billion last year accounting for 27 percent of total orders received by Taiwan firms.  HP, a U.S. firm, is one of Taiwan's biggest customers in the world.

Our bilateral investment relationship also continues to flourish.  Through 2004, U.S. investment in Taiwan totaled US$12.1 billion.  Corning's massive glass substrate plants in Tainan and Taichung are among the largest foreign investments on the island.  Both Motorola and Microsoft have built important research facilities here.  Most recently, DuPont joined them with its new Semiconductor Materials Technical Center, which opened in Hsinchu just last month.

Of course the ties between our two peoples are solid too.  Over 70,000 U.S. citizens live in Taiwan.  AIT issued nearly 200,000 visas last year, including more than 15,000 student visas.  While the number of Taiwan students going to school in the UK and Australia has declined in the last year, our numbers continue to grow.

The ROC-USA Business Council and its partners in cultivating the U.S.-Taiwan relationship have much to be proud of.  The last 30 years have seen our relationship emerge from a difficult period to consolidate and mature.  However, we still face many challenges.  I'd like to explain some of them and tell you about the efforts the United States is making to ensure that U.S.-Taiwan ties remain strong for the next thirty years and beyond.  Then I'd like to propose some steps Taiwan might consider to strengthen our ties.

Challenges

The U.S.-Taiwan partnership has gone through a lot and remained solid, but it will continue to be tested in the years ahead.  The world has changed since 1976.  The United States is engaged in a global war on terrorism and needs support from all of our friends around the world.  The Asian tigers of the 80s and 90s -- in fact all of us -- face the challenge of China's emergence as a world economic power.  Taiwan's relationship with the Mainland is especially problematic and fraught with dangers which require careful management.  The evolution of the U.S.-Taiwan relationship is itself a challenge.  As Taiwan's economy matures with the continuing advance of its high-tech sector, increasing importance of services, and the growth of a knowledge-based economy, we need to find new ways to enhance each other's economic growth.

U.S. Efforts to Strengthen the Partnership for the Next 30 Years

The United States is actively engaged in ensuring U.S.-Taiwan cooperation continues to grow for the next 30 years.  We are intent on helping Taiwan find appropriate ways for its voice to be heard in the international community.   We're working to boost Taiwan's meaningful participation in the vital health-related work of the World Health Organization.  We want Taiwan to be able to play a role commensurate with its status in other international organizations by helping Taiwan to become a signatory to the WTO's Government Procurement Agreement and to participate in important discussions on trade and human security matters at APEC.  Taiwan has so much to contribute to these organizations.  Many other members understand this.  Taiwan's active participation will further convince the international community of the benefits of Taiwan's full and active engagement.

The United States will also move forward with efforts to expand our economic relationship bilaterally.  We believe that regular engagement through the Trade and Investment Framework Agreement, or TIFA, provides the best channel at this time to enhance our trade relationship.  We are very much aware of Taiwan's interest in a bilateral free trade agreement, and we have discussed it with Taiwan's leaders.  But, with very little time remaining before the expiration of our Trade Promotion Authority next summer, it is premature to discuss an FTA with Taiwan at this time.  We have a range of issues to work out through the TIFA talks that will strengthen and deepen the bilateral trading relationship.  It is important to resolve these issues on their own merits.  Addressing them will be mutually beneficial.  Progress on these issues could also build U.S. domestic support for an FTA, if the U.S. Congress extends Trade Promotion Authority.  The most effective way for Taiwan to build support for an FTA among U.S. businesses would be to lift restrictions on cross-Strait trade, investment, and transportation - as called for by many of Taiwan's own world-class companies, the American Chamber of Commerce, and Ambassador Karan Bhatia during his May trip to Taipei.

We have other tools available for building on our trade relationship as well.  AIT's Commercial Section has assisted over 800 U.S. business visitors to Taiwan this year, supports the visits of hundreds of Taiwanese to attend 22 trade shows in the United States each year, and is currently assisting trade delegations from Puerto Rico, and the states of Washington, Indiana and Montana.  Our Agricultural Section has a strong market development program and cooperative research efforts targeting mutually defined technical concerns.  AIT is also focused on enhancing the security of Taiwan-U.S. trade.  The Container Security Initiative has been implemented at the Port of Kaohsiung and will soon expand to Keelung Harbor to ensure that the vital supply chains we all depend on are not disrupted.  We are also moving toward implementing the Megaports program to enhance the detection of radiological materials at the Port of Kaohsiung, with the full cooperation of Taiwan Customs.

Exchanges between our two peoples are another essential part of the relationship that AIT is working to further strengthen.  Last year, our Public Affairs Office sponsored more than 70 Taiwan visitors to travel to the United States to learn more about our country and how it works, or to study at an American institution of higher education.  Even as the United States uses more advanced technology to ensure the security of our borders and transportation system, our Consular Section at AIT is working hard to make sure that travel to the United States is as simple and convenient as possible.  Our officers are reaching out to Taiwan visitors to the United States to demystify the process of applying for a visa and to ensure that our applicants are served quickly and courteously.

What Taiwan Should Do

The United States will continue to look for ways to enhance our bilateral relationship and AIT will be in the forefront of this effort.  But we will need Taiwan's help.  Taiwan is conducting healthy internal debates right now on its future economic competitiveness, social priorities, security, and its relations with partners around the world.  I believe that the recently-concluded Conference on Sustaining Taiwan's Economic Development made an important contribution to this process.  The U.S. wants this process to succeed.  I applaud the efforts of Taiwan's political leaders to gather scholars, activists and business leaders together to candidly discuss Taiwan's future and develop strategies to preserve the vibrancy of Taiwan's economy.

I also commend Taiwan's business leaders for actively participating in the conference with an open mind.  The business community has an essential role to play in this process.  Taiwan has a long history of an open and productive dialogue between business and the authorities.  I am confident that you will continue to use those channels to focus the attention of Taiwan officials on what needs to be done to ensure Taiwan's future economic prosperity.

TIFA Agenda

One important priority for Taiwan should be the U.S.-Taiwan bilateral agenda of the TIFA talks.  Deputy U.S. Trade Representative Bhatia's highly successful visit in May identified several key issues that require further attention.  Taiwan must address the concerns of international pharmaceutical companies to ensure that drug licensing and patent regulations provide adequate protection for their intellectual property.  Taiwan's health insurance system must also adequately support innovation and ensure patients in Taiwan have access to the newest and most effective treatments available. We have seen progress.  AIT is engaged in an active and productive discussion with the Bureau of National Health Insurance and private sector stakeholders on health care reform issues.

On agricultural trade, the TIFA talks laid out an agenda to further strengthen this important component of our bilateral relationship.  Taiwan needs to make sure that its technical restrictions on food imports are science-based and allow Taiwan consumers access to safe goods from the United States and elsewhere.  Taiwan should also ensure that U.S. rice producers continue to have access to the local market.  During the TIFA talks we agreed to address these and other issues through a new Consultative Committee on Agriculture.  Working closely with Taiwan's Council of Agriculture, I hope we can initiate this new forum for discussion soon.

The United States and our like-minded friends around the world have worked hard to facilitate Taiwan's accession to the WTO's Government Procurement Agreement.  Taiwan needs to take the final steps necessary to accede to the agreement, so that firms from Taiwan can gain all the benefits of greater access to the government procurement markets of the United States and other WTO members.

As I mentioned earlier, every one of these trade issues is one that Taiwan should address not only to resolve U.S. concerns, but because it will bring economic benefits directly to Taiwan's people as well.

Cross-Strait Liberalization

Another important issue underscored by Ambassador Bhatia is the need for Taiwan to further open its economy to Mainland China.  As I mentioned earlier, this is a matter of urgent interest to U.S. and Taiwan businesses alike.  Taiwan businesses want to be able to pursue investment and trade opportunities in the PRC to expand their markets and take advantage of economies of scale.  U.S. businesses are eager to integrate their Greater China operations into one seamless market.  I commend Premier Su for taking on this issue by convening the Conference on Sustaining Taiwan's Economic Development and discussing the benefits and risks to Taiwan's economy of further cross-Strait opening.  I hope that the government will act soon to implement the range of recommendations that emerged from the conference. Easing restrictions on the flow of goods, money and people across the Taiwan Strait is critical for Taiwan to retain its place in the regional economy.  An important step will be the expansion of charter flights as an interim step towards regular commercial flights.  Restrictions on investment must also be relaxed, and PRC business travelers and tourists should be welcomed to come to Taiwan in greater numbers.

Defense

Finally, Taiwan must ensure that it can provide for its own defense.  We look to Taiwan to embrace a strategy that promotes stability.  Addressing immediate needs and future capabilities in a balanced way will enable Taipei to deal with Beijing from a position of strength and self-confidence. This will in fact facilitate cross-Strait economic opening.

Conclusion

I've laid out an ambitious set of recommendations for Taiwan.  These are demanding tasks, but they are important to strengthening the close partnership between Taiwan and the United States.  I have every confidence that Taiwan's people will be up to the challenge.  You have faced many obstacles over the last thirty years but have consistently succeeded in overcoming them, ending up stronger than before.  It is this knowledge that allows me to maintain my abiding optimism in Taiwan.

The ROC-USA Business Council may have reached the ripe old age of 30 years, but let me reiterate - America still puts its trust in you.  In fact, not only do we trust you, we're counting on you to make sure that U.S.-Taiwan relations continue to flourish for the next 30 years and longer.